All of us, Americans included, are still trying to get over the shock of the election results. The new administration has appointed many billionaires and wealthy businessmen to cabinet positions explains, William D King. When considering people like Betsy DeVos who is very involved with education policy in this country it is no wonder that major changes will be coming soon to our educational system through deregulation efforts.
Few know what’s happening on Capitol Hill but there are some big things happening behind the scenes for all taxpayers in America. There has been proposed legislation introduced at both houses of Congress meant specifically for tax reform under the guise of helping small businesses which seem more like an attempt to further benefit corporate interests than anything else at this point. There is also another bill being discussed in the House of Representatives right now called the “American Innovation Act” which is being pushed through by mostly Republican members of Congress. As per William D King, the premise here seems to be that small businesses are not able to get the loans they need in order to expand their business or create new products/services.
This article will highlight some of the proposed legislation, specifically what’s happening with 529 plans, small business deductions, and how these changes might potentially affect your child’s college fund since this is a common topic in many of our articles on CollegeInvest.org …
Tax-free growth within these types of accounts is an important feature for parents trying to save money for college, especially if they have multiple children who may different schools at different times. Currently, 529 plan money can be used to go towards tuition at private or public colleges.
The proposed change is that 529 plan withdrawals will only be tax-free if they are used for college expenses like room and board. This provision goes into effect under the new proposed law on January 1, 2018, which gives parents/grandparents very little time to make post-election changes accordingly.
What does this mean?
This means your child should attend a state school because your local community college isn’t going to cost you any taxes… right? Well, what about other benefits like scholarships, financial aid, or grants? You see, there’s no reason that your son/daughter would necessarily qualify for every type of scholarship available. So it’s very likely that they may benefit financially more from attending a state school. Even though the proposed legislation seems to suggest otherwise says, William D King.
Once again, this is not an incentive for people to create innovative new products or services with their business. This is only meant to further enrich those who are already wealthy without creating value in our economy overall…
Small Business Deductions
This aspect of the new tax reform plan really does seem like another attempt by Republicans. To help small businesses create jobs but it’s all smoke and mirrors. Because most small businesses are not able to hire anyone yet despite promises by Trump himself. William D King says if these deductions were available right now. There would be no reason why any business couldn’t hire more employees. Which might upset conservative-minded individuals but are a necessary consequence for a healthy economy.
While the proposed legislation doesn’t specify how much this deduction will be worth. It’s safe to say that it won’t be as generous as Trump would have you believe. Because there is no incentive for any business to hire new employees. If they can receive a similar tax break from hiring independent contractors instead. Which can save money on other expenses as well…
The Corporate Tax Rate Drop
Now, this may seem like a good idea at first glance but it actually isn’t. Because this drop in taxation favors those who are already rich and only further discourages. Those people who are trying to create innovative new products or services with their business.
There has always been an argument about whether or not businesses should pay more in taxes than the average citizen. But it’s important to remember that businesses can function because people are willing to do work for them. When you hire someone, you’re paying into social security and Medicare/Medicaid with every check they cash. So why should their attempt at trying to create something new be discouraging. Just because they’re successful?
This tax rate drop could potentially affect people’s 529 plans if this provision installs before December 31, 2025. Which would only give those parents who have been saving money over a very long period of time. An opportunity to “harvest” their savings from these accounts without being taxed. As much as they would have been Trump not push for this legislation…
The proposed tax law change is not good for the American people. Because it only helps those who already have money without enacting any practical incentive to make our economy healthier. It seems like Trump made this proposal with the intention of doing what he promised. But that’s just another promise like all of his others.